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Disruption.6 Radical Ideas That Change Commercial Real Estate Forever!

6 Radical Ideas That Change Commercial Real Estate Forever!

Let’s go back to the old days say 2002 and you are in the boardroom at BlockBuster,shoes shined sweet tie and poppin white shirt. Sales are brisk and the stock price per share is kicking ass. The board meeting has the general reports read by the designated members and all looks well. Nothing left to do generally but pat each other on the back and drink a celebratory glass with your genius board members. Then someone stands up and says “Wait. I have a great idea, let’s let our customers watch their favorite movie anytime they want from any device they want for free”. The next thing you hear is the door opening and the security guard motioning for the idiot to step outside. You wonder how he got on the board in the first place. Must have been the son of some big shareholder. Nothing wrong with a little brainstorming but hey,the board and management have a great plan and they are executing it like a machine.

Well someone somewhere did have that crazy idea and called it Hulu. Check the balance sheet of BlockBuster today. Wait your right, they just got bought out of bankruptcy court by Dish Network. Do I need to even mention the Netflix business model? What may seem radical in thought not so long ago may prove over time to be not so radical. What are those seemingly radical ideas in commercial real estate? Shocking I know but….I have a few thoughts.
1. All Data is Free

Aggregation, compilation, qualitative, qualitative,variable, sustainable, categorical, variable etc. etc. The need or perceived necessity to pay for any type of commercial real estate data is Killing the commercial real estate market. Whoever controls the data controls the market. If we in commercial real estate do not stop paying for the data we already have the consumer/client will take the data and Create the real commercial real estate market.

2. The Building Markets Itself.

Geo-mapping, Geo-data video, 5-d Platforms, Entire historical databases dedicated to one specific location, BIM. All of this is not “new” technology. It is rapidly becoming “old” technology. Pick any device and search any location. The building markets itself.

3. Eliminate Brokers and or the Brokerage Model.

We are selling a service that is no longer needed to a consumer/client that no longer sees a real value for the service and is becoming reluctant to pay. How much value do you think the market places on decisions that were made 2-3-4-5 years ago. How do those decisions look today? With a shout out to Rob Hahn. Change the brokerage model to something similar to a legal/accounting firm or become the next Grubb & Ellis.

4. Leases Are No Longer Binding.

WHAT? Shared space, co-working environments, virtual hubs, a huge movement already adopted by CBRE. No way this works or the only way that a good percentage of commercial real estate spaces will have to adapt just to survive. The workforce will demand flexibility, innovation and complete transparency from the commercial real estate industry…..or they will create their own. How will it work? Two words: Worldwide Competition.

5. Eliminate All Green Sustainable LEED Standards.

Standards defined by who? The government, a not for profit organisation out of DC, a made up association? Marketing scam,unrealistic expectations,law suits by consumers/buyers/owners for what? Status conscience, money grabbing, green brick huggers?

6. Create A Dead Center Tear Down Program.

Dead Centers. They do not dot the landscape they are defiling it. In almost every city town and burg in this nation. Empty,decaying, rancid, useless,valueless. Most owned by complete idiots that still think the world will go back to the Hummers and Harley in every garage era. Tear them down and start rebuilding and or creating a real use for the community even if that means leaving the land empty and clean until the next generation with more brains and balls than this one makes some better decisions.

Ridiculous?

Way too radical for any sort of adoption?  Are you like one of the geniuses that sat in the boardroom at BlockBuster patting yourself on the back and thought the world would NEVER change? Oh no, you are way too smart for that!  Thoughts?

Photo Credit:http://www.flickr.com/photos/arconada/

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  • There’s always going to be a market for good service and advice as it relates to commercial real estate. I do agree though, those brokers that use the information as a comodity like its for sale is quickly coming to an end! Be more than a paper pusher.

    Social Media and strategic partnerships are the the next step in #CRE future. Get connected.

    • Chris,
      You as much as anyone is on the CRE SM egde. SM is just a tool it will not create magic or save any CRE business. The info and tech<<<will create the new CRE market!

  • Bob

    A bit harsh, but not all that ridiculous. I say harsh because I find extremes don’t work and your ideas are a bit to rash and extreme. Of course, you are the exception to the rule Duke. The masses have yet to discover social media, so they aren’t as worldly or wise as you. They really don’t know it’s broken, they just think the recession has temporarily shut it down.

    • Bob,
      The simple point is that what may seem harsh and rash today becomes the business model of tomorrow. 2002…. does it seem that long ago. Did technology or just stupidity doom certain companies. The same holds true for CRE.

  • Jim Garrett

    Duke,

    I think you’re right on target. All we have to do is look at our business history from the last 50 years to realize that those unwilling to change because of stubbornness, arrogance or the complete lack vision are gone.

    Need a few reminders? Montgomery Wards, Sears (might as well be out of business), PanAm, TWA or the big three automakers. That’s just the tip of the iceberg.

    In the book, “What would Google do”, Jeff Jarvis offers a very compelling reason why, if the real estate industry does not change, it’s in serious trouble.

    At the end of the day, I doubt that the industry will lead the way to change. The customer will drive the change and the industry will be forced to adopt or file for bankruptcy.

    • Jim,
      WOW, what timing as you were writing this comment I was writing a post about the very things you highlight. Simply put, the consumer has changed forever…and they are not going back to the old ways. Change, adapt or File for Bankruptcy. I kinda like that.

  • Janice Phalen

    The customer is demanding change! Are we an 8 – 5 business anymore? Monday thru Friday? When Loopnet put data, that I am paying for, about every property owner it flattened the industry. No more competitive advantage about how big my database is. The business could go by the wayside if mortgage interest deductions go away and every lease goes to month-to-month, which a lot of them have in this economy. A tenant signs for 3 years and is gone in 12 months. Owners don’t like paying commissions for sketchy tenants, which there are a lot of these days. How many residential agents survive on rental properties? The industry has changed in this new economy, we haven’t caught up and lead the way with change.

    • Janice,
      Great points. Trying to highlight some of the issues that may have to change in CRE whether we like it or not. Thanks for your thoughts!

  • I’m reading all the comments and can’t help to think that one key point is missing, That because of the internet the people that relied on Commercial Agents & Brokers are becoming a lot more business savy when it comes to their needs for our services and some have taken the time to research the property or business they are interested in and are handling the transaction them selves mainly because the Commercial Real Estate market is alot less complicated than residential and a well written contract will be the only document that will be done by the new breed of business enterapueners will use to purchase,sell,lease and purchase businesses.

  • Cathe Poulson

    Of course the industry will change – change is a constant guarantee. Don’t be afraid of that change – you’ll only paralyze your success. The truly savvy client chooses a broker/agent who can interpret the available data. The fact that data is more readily available does not give that client more time to research the data – let alone the experience or education to make an intelligent decision regarding the data. As the professional you need to stay connected to your market and your industry – your current perspective is why your clients choose to work with you.

  • Duke, Great post and great comments. CRE is changing and it will continue to change. As brokers we need to focus on the process. How can we make the process of evaluating commercial real easier and less time consuming for our clients? Unfortunately, or fortunately for some, CRE companies and brokers are so worried about getting in front of the next deal they don’t think about their own process. Therefore, in my opinion, we’re seen as a step above a used car salesman. So, Duke I believe that change is coming and our customers are going to demand it.

  • David

    One thing I’ve learned in CRE is that it is the slowest adopter of technology and change within an organization and the market-structure for broker pay incentives the brokerage firms to not free up information or drive change as well. You can’t get rid of brokers because they do provide a valuable service, but the model for how they are compensated is broken and every client and landlord out there knows it. No large firm will drive the change you point out Duke, but you are spot on for every point.

    How long will it be before Google has ACCURATE information on every building over 10k SF in the US? They just opened up their Google Maps editor for anyone to use and update locations. Why do we pay LoopNet or CoStar for out-dated, inaccurate and misleading information still? Because no one yet is incentivized to make it free. We started this same conversation in my group a year and a half ago so that we could try and stay ahead of it.

    Keep it up, you are quickly becoming my go to source for new ideas and challenging my existing thoughts.

  • Garrett Krueger

    Enjoyed this one Duke, there’s no question that consumers have more access to what’s on the market (for lease and for sale) now than they did 10 yrs ago. I dont think that has decreased commissions though, do you? I havent seen many landlords or sellers try to proactively change the industry by not offering a commission, firing brokers, and rarely even capping commissions. If anyone can think of a way to give away real estate data for free and create a business around through other revenue steams, I’d encourage them to balance the federal budget as an encore!

    • Garrett,
      I will work on both. How much worse could I do?

  • Interesting thoughts on LEED certification. We’re not on the same page necessarily, but I have some LEED certification tips of my own to pass along that you may find interesting. LEED certification can be an extremely beneficial tool for a company. While it can be a hassle to implement, especially in existing buildings, the benefits are plentiful and far-reaching.

    Take a look at this webinar LEED EBOM: 101: Essential Tips for the Greening of Existing Buildings. It discusses how management should go about gaining LEED certification, and showcases the many positive effects LEED certification has on a building.

    http://blog.buildingengines.com/2011/04/leed-ebom-101-essential-tips-for-the-greening-of-existing-buildings/

  • Bcanter

    Duke excellent insight and very thought provoking.The only one I disagree with you about is #3.
    I serve the small business community and the lack of knowledge about commercial real estate is extreme. Too many small business owners get hurt by overly biased leases which favor the Landlord.
    Janice many times it not that the tenant is sketch it’s that they got hosed by a landlord on several fronts which are too long to get into in this response. Perhaps the big companies can see their way of not needing brokers but that is not my focus, they will fend for themselves as they always do. That being said one of integrations that was predicted by Corenet in 2003 was the growing emergence of the large company’s HR department to perhaps even becoming a “C” level position. Why? Because what is real estate all about? People, people, people. And Duke you are correct the market is changing. Companies are looking for efficiencies of space use. Teleworking, hoteling and a host of other space saving protocols are fast becoming adopted. The owners and the brokers really don’t want that to happen. Landlords are selling space, I think the part of brokerage that will continue to bring value are tenant or buyer reps. The property side is almost useless at this point, just as being a house property side broker is almost useless as the Internet and Realtor.com sure made “finding” a house pretty easy. But you still need to know and learn the market. Whoever said the commercial real estate world is getting less complex and would argue that is so not the case. Tenants especially small tenants need all the help they can get.

    • Anonymous

      I serve the small business community and the lack of knowledge about commercial real estate is extreme.

      For many small businesses whose location is customer facing (retail, restaurant, consulting or services), this is a bit of a red flag. If the small business is wanting to serve customers from their location, they had better gain some knowledge about real estate. It’s part of running a small business, being engaged in the community and knowing your customer and market segment, competition, what is going on in the neighborhood.

      For people that just need a generic office to put their workers in cubes… yeah I agree with you – RE falls way below their radar.